Why Big Lots Shares Are Jumping Today

Big Lots Inc BIG reported second-quarter FY23 sales decline of 15.4% year-on-year to $1.14 billion, beating the consensus of $1.10 billion. The decline to last year was driven by a comparable sales decrease of 14.6%.

Gross margin for the quarter expanded to 33%. The operating loss for the quarter was $(122.09) million versus a loss of $(109.09) million a year ago.

The company held $46.03 million in cash and equivalents as of July 29, 2023.

At the end of the quarter, inventory was $983 million, a 15.2% Y/Y decrease driven by lower in-transit inventory, on-hand units, and average unit cost.

Adjusted EPS loss of $(3.24) beat the consensus of $(4.12).

"We significantly strengthened our balance sheet by closing the $294 million sale/leaseback deal on August 25, the proceeds from which were not included in our quarter-end liquidity of $258 million," commented Bruce Thorn, President and CEO of Big Lots.

Related: Big Lots Likely To Post Wider Q2 Loss; Here's A Look At Recent Price Target Changes By The Most Accurate Analysts

The company continues to expect business improvements in the second half of 2023, with a moderating comp sales decline and gross margins improving. Cost-cutting and productivity plans are on track through 2024.

Outlook: Big Lots sees Q3 comparable sales to be down in the low-teens range, modestly improved relative to the second quarter.

For Q3 gross margin, BIG expects accelerated rate improvement in the second half of the year, with ~200 basis points of improvement in the third quarter relative to the prior-year quarter. 

For Q4, the company expects comp sales to be improved relative to the third quarter and be in the high-single-digit negative range and the gross margin rate to improve to a rate into the high-30s range.

Price Action: BIG shares are trading higher by 25.3% at $7.87 on the last check Tuesday.

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